Problem Set 3 (Chapters 6 & 13) Flashcards
Which of the following is an example of a government price control?
a.price ceiling
b.price floor
c.price support
d.all of the above
D
A price ceiling set above the equilibrium price causes
a.a shortage
b.a surplus
c.no effect in the market
d.an increase in supply
C
Which of the following would cause a surplus to exist in a market?
a.a price floor set above the equilibrium price
b.a price ceiling set above the equilibrium price
c.a price floor set below the equilibrium price
d.a price ceiling set below the equilibrium price
A
A powerful hurricane hits the NC coast causing a temporary decrease in the supply of gas. In order to help consumers not experience higher temporary prices for gas, the government imposes a price ceiling. What will be the result?
a.an efficient market where all consumers can purchase the gas they need
b.a temporary shortage of gas
c.a temporary surplus of gas
d.consumers paying significantly higher prices at all gas stations with the temporary decrease in supply
B
Suppose the government decides the equilibrium wage for steel workers is too low, thus sets a minimum wage that is higher than the equilibrium wage. Using our analysis of supply and demand, what will be the result?
a.a decrease in the supply curve for workers
b.increased employment of steel workers
c.a decrease in the demand curve for workers
d.increased unemployment of steel workers
D
Suppose the government levies a tax on the market for avocados. Assuming a normal upward sloping supply curve and a normal downward sloping demand curve for avocados, the price for buyers will _______, price received by sellers will ______, and quantity sold will ______.
a.increase, decrease, decrease
b.increase, increase, decrease
c.increase, increase, increase
d.increase, decrease, increase
A
Suppose our federal government wants to enact a tax that will cause a greater burden of expense to consumers purchasing that good, than the burden of expense to firms producing that good. Which would be optimal?
a.a good with a relatively elastic demand, and relatively inelastic supply
b.a good with a relatively inelastic demand, and relatively elastic supply
c.both of the above
d.neither of the above
B
Suppose our federal government decides to reduce air pollution by reducing consumers’ use of gas. In order to do this, they impose a tax on each gallon of gas sold. The tax will be more effective in reducing the use of gas by consumers if
a.demand is inelastic
b.demand is elastic
c.demand is perfectly inelastic
d.all of the above
B
Homer sells cupcakes on Saturdays. He spends $50 for ingredients and sells $190 worth of cupcakes. If he didn’t sell cupcakes, he could work at the local brewery on Saturday and earn $150. In his cupcake business, Homer has an accounting profit of _________ and an economic profit of ________.
a.$140, $10
b.$140, - $10
c.$40, $50
d.$190, $50
B
The table below shows the marginal product of labor for a shoe manufacturer. At what point does the law of diminishing marginal returns set in?
Number of Workers Employed Marginal Product of Labor
(Per Week) (Pairs of Shoes Per Week)
0 -
1 30
2 40
3 20
4 -10
5 -20
a.After the second worker is hired.
b.After the first worker is hired.
c.After the third worker is hired.
d.After the fourth worker is hired.
A
Suppose you operate a factory producing wrenches. Your current level of output is 1000 wrenches per week. Your weekly fixed cost is $40,000. If your weekly total cost is $100,000,
a.average variable cost of production is $80
b.average total cost of production is $60
c.average fixed cost of production is $60
d.average variable cost of production is $60
D
If a higher level of production allows workers to specialize in particular tasks and be more productive, a firm will likely exhibit __________ of scale, and _________ average total costs,
a.economies, decreasing
b.economies, rising
c.diseconomies, decreasing
d.diseconomies, rising
A
A firm is producing 50 units of output at a total cost of $200. The firm’s average fixed cost is $1 per unit. What is the firm’s variable cost?
a.$50
b.$100
c.$150
d.$200
C
The wrench factory is producing 1000 wrenches with an average total cost of $4 and a marginal cost of $5. Which of the following is true?
a.If production increases, we would expect average total cost to increase
b.If production increases, we would expect average total cost to stay the same
c.If production increases, we would expect average total cost to decrease
d.If production increases, we would expect marginal cost to decrease
A
The figure below shows the long-run average cost (AC) curve for a firm that produces radios, as well as four short-run average cost curves. Each of the short-run average cost curves corresponds to a different-sized plant–AC1 is associated with Plant 1, AC2 is associated with Plant 2, etc.
Which plant is optimal if the firm is going to produce 2,500 radios per week?
a.Plant 3.
b.Plant 2.
c.Plant 4.
d.Plant 1.
B
